The government shutdown did not stop the official opening Oct. 1 of the Defense Health Agency, a major streamlining of military medicine that has been in the works for three decades and signed into law earlier this year.

“This day has been a long time in coming, and represents a major milestone in the history of the department and in military medicine,” Dr. Jonathan Woodson, Assistant Secretary of Defense for Health Affairs, wrote in a message to staff.

Air Force Lt. Gen. Douglas Robb heads the new agency, which is to streamline health care among the Army, Navy and Air Force medical departments. The agency is charged with creating common business and clinical practices for the services and integrating functions that each has done separately, such as purchasing medical supplies and equipment.

In a message to staff, Robb acknowledged the budget challenges and government shutdown that coincided with the first day of operations for the DHA, saying, “how we deal with and overcome these challenges will be the true test of our character and our strength.”

The military health system provides medical care on the battlefield as well as to service members, their families and military retirees at home. It is one of the largest health care systems in the world with 56 hospitals, hundreds of clinics and 160,000 employees. Some 2,500 babies are born each week into the system, which has an annual budget exceeding $50 billion.

Like in the civilian sector, military health care costs have increased faster than inflation. Military health costs have more than doubled in the past decade, increasing from $19 billion in fiscal 2001 to $51 billion in fiscal 2013. The category now accounts for more than 10 percent of the department’s budget. That figure is expected to grow, with the cost reaching $77 billion by 2022, according to the Congressional Budget Office.

Integrating Care and Improving Service

Allen Middleton, acting deputy director of the Defense Health Agency, said the agency reflects a recognition by everyone in the department for the need for military health care to be more integrated and more efficient. “We think there’s a huge opportunity here for us to improve readiness, individual health and sustain quality, while also saving money.”

“We do a lot of things in common across our system, and the agency is going to help us to bring various services together and deliver services in a more consistent way,” Middleton said. “We have had different organizations managing health IT; multiple organizations setting and overseeing pharmacy programs; and the list goes on.”

To start, the Defense Health Agency is establishing a “shared services” model for managing and overseeing the operational work for health information technology, medical logistics, pharmacy operations and facilities planning for the services. In addition, the agency will manage the TRICARE health plan for the military’s 9.6 million beneficiaries. TRICARE Management Activity’s 800 workers are now part of DHA. Approximately 500 Army, Navy and Air Force staff – mostly IT professionals – have also moved to the new agency.

Defense health officials estimate the savings from these “shared services” will total at least $3.4 billion in the agency’s first five years. They plan to submit their final report to Congress on implementation objectives, milestones and estimated cost savings later this month.

By Oct. 1, 2015, the agency is to be fully operational, and will also incorporate management and oversight of additional shared services, to include contracting, medical education and training, public health, resource management, and medical research and development. New shared services may be added over time, Middleton added.

Creating the DHA is just one of a list of things that Defense officials are doing to try to both improve the readiness of the force and slow the growth in military health costs. “It will, hopefully, bend the curve a little bit,” Middleton said.

While the reorganization is a big change for the overall MHS and the three Service medical departments, officials believe that the near-term effect for beneficiaries will be minimal, and that – over time – it will be even easier for them to be seen at military treatment facilities, and more convenient to use online services.

The Path Toward Activation

The idea of creating a single, unified military medical agency or command has been the subject of debate since World War II. Launching the new agency represents the biggest change in the military health system in more than 60 years.

“The Army still has its medical command. The Navy has its structure. And the Air Force still has its structure,” Middleton explained. “Those are unique missions that each of them has. And those unique mission requirements need to be preserved at all costs. All we’ve done is say, ‘Let’s bring some things together in a joint way.’ This is as far as we’ve ever come in doing any of this.”

Defense officials took another look at how to best organize military medicine several years ago. One big influence was seeing Army, Navy and Air Force medical personnel work more closely together in Iraq and Afghanistan. “If you went to a contingency hospital overseas, you might have a Navy nurse anesthetist, an Army surgeon and an Air Force med tech all working on you. Nobody knows the difference,” Middleton said. “Our medical fight in theater is a joint operation.”

Then-Deputy Secretary of Defense William Lynn appointed a Task Force on Military Health System Governance in 2011 to study how things might be reorganized. The task force reviewed different options and endorsed the creation of the agency.

Another of the task force’s recommendations that the deputy secretary subsequently directed was to name market leaders to create a unified business plan for each of their respective six multi-service markets – geographic areas where more than one branch of the military operates medical facilities.

These multi-service markets are: the National Capital Region in Washington, D.C.; the Tidewater region of Virginia; Colorado Springs, Colorado; San Antonio, Texas; Puget Sound, Washington; and Honolulu, Hawaii. The new National Capital Region Multiservice Market is part of the DHA and replaces Joint Task Force National Capital Region Medical Command in Washington. These “enhanced” markets, as they are known, provide nearly half of all inpatient care delivered in military hospitals, encompass 40 percent of all TRICARE Prime beneficiaries enrolled to a military clinic, and serve as the primary medical training platforms for military medical staff.

These leaders, known as multi-service market managers, also have the authority to move medical personnel in a market in order to improve access to care, and keep their medical staffs fully utilized. The goal is to provide as much care as possible within military medical facilities and reduce care sent to the private sector – a step that both improves continuity of care and reduces costs.

The military treatment facilities are “where we really want to see the patients,” Middleton said. “We think it’s high-quality by all standards,” he continued, “and it’s important for clinicians to see many patients to maintain their skills.” The DHA will provide the managers of the multi-service markets with the data and analysis they need to make good medical and business decisions, Middleton said.

“Everything we do is designed to enhance the readiness of the force – the medical force, as well as the fighting force,” he said.